MAJESTIC WINE PLCANNUAL REPORT AND ACCOUNTS 2006

Majes tic

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006

Peop le,ourGrea tes t Asset

CONTENTSINTRODUCTION 01CHAIRMAN’S STATEMENT 02REVIEW OF OPERATIONS 04PROPERTY 08DIRECTORS AND ADVISERS 10DIRECTORS’ REPORT 11AUDIT REPORT 15GROUP PROFIT AND LOSS ACCOUNT 16GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 16BALANCE SHEETS 17GROUP CASH FLOW STATEMENT 18NOTES TO THE GROUP CASH FLOW STATEMENT 19ACCOUNTING POLICIES 20NOTES TO THE FINANCIAL STATEMENTS 22

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 01

MAJESTIC OPERATES THE LARGEST WINE WAREHOUSE CHAIN INBRITAIN, SPECIALISING IN THE SALE OF WINE BY THE MIXED CASEDIRECT TO THE PUBLIC.MAJESTIC DIFFERENTIATES ITSELF BY THE HIGH QUALITY OF ITSCUSTOMER SERVICE AND ADVICE, THE DIVERSITY AND QUANTITY OF STOCK AVAILABLE TO PURCHASE AT EACH STORE, ITSDEDICATED ON-SITE CUSTOMER PARKING, WINES TO TASTE EVERYDAY, THE ABILITY TO ORDER IN STORE OR VIA ITS WEBSITE AND THEAVAILABILITY OF FREE DELIVERY THROUGHOUT MAINLAND UK.

INTRODUCTION

A GREAT SENSE OF PRIDEI joined Majestic in April 1991 and since then things have changed quite a lot. We have made great leaps forward and the enthusiasm of our customers and staff has not changed. The attitude is very personaland customers, who see the store as their own wine merchant, will taketime to wait for ‘their’ Majestic person.

I read of the plans to open the St John’s Wood store and was determined to getthe position. The temperature-controlled Fine Wine Centre opened in July 2003and is a store within a store. The range features over two hundred wines from£20 to £750 a bottle.

It has been tremendously rewarding to take a new store from opening tobecoming one of the top performers in such a short period of time.Consequently, I was entered into the Off Licence News Store Manager of theYear awards and was delighted to discover (whilst I was on a wine tasting trip inAustralia) I had won the award for Best Retail Manager. When you do a job youlove, it gives you a great sense of pride to be recognised by your peers.

CAMPBELL ARMERMANAGERST. JOHN’S WOOD

RightCampbell won the national Off Licence News Store Manager of the Year award for 2006.

02MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006

CHAIRMAN’S STATEMENT

En ergyand Commitmen t

02 £104.6

TURNOVER (£M)

03 £125.7

04 £148.3

05 £162.5

06 £172.2

02 £6.1

PROFIT BEFORE TAX (£M)*

03 £8.3

04 £10.6

05 £13.2

06 £14.5

I am pleased to announce that profit before the exceptional gain, tax and amortisation of goodwill was £14.5m, an increase of 9.8% overlast year. Total Group sales were up 6.0% to £172.2m and like for like UK sales grew 3.8%.

DIVIDENDThe Board is committed to continuing our progressive dividend policy, and so weare recommending for approval by shareholders at the Annual General Meeting a final dividend of 5.1 pence net per share payable on 11 August 2006 toshareholders on the register on 14 July 2006. This brings the total dividend to 7.0 pence net per share, an increase of 27.3% on 2005.

*BEFORE TAX, EXCEPTIONAL GAIN AND AMORTISATION

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 03

• PROFIT BEFORE EXCEPTIONAL GAIN, TAX AND AMORTISATION OF GOODWILL INCREASED 9.8% TO £14.5M.

• TOTAL GROUP SALES WERE UP 6.0% TO £172.2M AND LIKE FOR LIKE UK SALES GREW 3.8%.

• DIVIDEND INCREASED 27.3% TO 7.0 PENCE.

02 2.0

DIVIDEND (PENCE PER SHARE)

03 2.75

04 4.125

05 5.5

06 7.0

BOARD CHANGESDuring the year we made a number of appointments to strengthen the Board.

We appointed Helen Keays as a non-executive Director on 1 November 2005.Helen, 42, is a marketing professional and brings to the Board a wide experienceof several consumer sectors, including travel, retail, financial services andtelecoms.

We promoted Steve Lewis on 5 January 2006 to the newly created position of Chief Operating Officer with responsibility for Majestic's trading operations.Steve, 42, was previously our Retail Director. He was first appointed to the Board in 1998.

Justin Apthorp was appointed to the Board as Buying Director on 5 January2006. Justin, 44, has been a buyer at Majestic since 1992 and has managed thebuying department for the past three years.

PEOPLEMajestic’s greatest asset, which does not appear on our balance sheet, is its firstclass team of retailing and support professionals who, as ever, have worked withenergy and commitment to achieve this result. I would like to thank them formaking this another very good year for our business.

CURRENT TRADINGSales growth in the first eleven weeks of the financial year, from 28 March to 12 June, has been encouraging with like for like UK sales up 8.6%.

SIMON BURKECHAIRMAN19 JUNE 2006

04MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006

REVIEW OF OPERATIONS

02 271

NUMBER OF CUSTOMERS WHO MADE PURCHASES (000)

03 294

04 325

05 354

06 374

TRADINGWe have seen encouraging growth in our database. There are now 374,000customers who have made purchases in the last twelve months, up by 20,000 on last year. The average bottle price of still wine purchased at Majestic hasincreased to £5.59 from £5.51 and the average spend per transaction has risento £118 from £113 last year.

We saw good sales growth in wines from Burgundy, Spain, South Africa, New Zealand, Chile and Argentina. In addition sales of Champagne, sparklingwine and rosé wine performed well.

Sales of fine wine continue to grow strongly. We have seen an increase of 30% in sales, and still wine priced at £20 and above, now represents just over 3.1% of UK retail sales. We currently see the potential for around 25 of our stores tohouse small areas dedicated to the sale of fine wine. During the year we installednew fine wine display areas into our stores in Berkhamsted, Richmond,Weybridge, Belgravia and Milton Keynes and have been pleased with their salesperformance. Since the year end we have also upgraded Harrogate, Cheltenham,Haslemere, Shepherd’s Bush and Sunningdale to include fine wine display areas.

During the year we operated five distinct promotional periods supported by the mailing of our detailed price lists to our customer database. In addition wemailed new style promotional flyers to customers last July and late November. The combination of long-term price offers interspersed with short-termpromotions has proven to be successful and we will continue to develop this strategy.

SUMMER PRICE LISTBelow371,000 customers received our summer price list with special offers on over 400 wines.

PROMOTIONAL FLYERSBelow rightOur new style promotional flyers, featuring attractive short-termspecial offers, have proved popular with Majestic customers.

En coura gin gGrowthThe year has seen a pleasing increase in operating profit to £14.0m, up 10.7% from £12.7m last year.

The operating margin percentage has increased to 8.1% from 7.8% last year as a result of a further improvement in gross profit percentagecoupled with our tight control over costs.

Diluted earnings per share increased by 2.8p to 16.0p. This strong growthis partly attributable to an unusually low tax charge, which includes aprior year credit worth 0.6p per share arising on the exercise of employeeshare options.

05MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 05

VICKY LANGLOISPeop le, our Grea tes t Asset

CUSTOMER SERVICEOur business is most notably differentiated from the competition by the quality of the customer service delivered by our friendly and knowledgeable staff.

We recruit young and energetic individuals primarily at graduate level and placegreat emphasis on training in wine knowledge, customer service and operationalmanagement. We have developed internally a comprehensive trainingprogramme, which is recognised as being one of the best in the wine industry. All our retail staff take the Wine and Spirit Education Trust’s (WSET) AdvancedCertificate after about six months in the Company. We encourage staff to furthertheir wine knowledge and currently 32% of our Managers and AssistantManagers either hold or are studying for the WSET Diploma. We were delightedthat six members of staff received WSET “Awards of Excellence” in January 2006for outstanding papers in their Advanced Certificate and Diploma examinations.

We offer free delivery 7 days a week arranged at a time to suit, including Mondayto Saturday evenings, and a carry to car service for customers visiting our stores.We stock a wide range in depth at each location and customers can always tastea selection of wines at our store tasting counters.

A SENSE OF BELONGINGI was brought up in Jersey so I have a massive French influence in my life andhave a natural appreciation for wine. I first came across Majestic at a graduaterecruitment fair and was struck by their relaxed, friendly and laid back approach.This created a great initial impression because I had felt that some elements of the wine trade might be quite stuffy, but this changed my perception and I am delighted to have seen the warmer side.

Once I was given the opportunity I never looked back. I was really made to feel part of theteam on my first day. They opened a nice bottle by way of a welcome and I have becomebest friends with the people there. The fact that we spend 10 hours working together andfinish with a lot of time socialising afterwards says quite a lot.

Customers are really interested and into their wine. They have a thirst for knowledge andare enthusiastic to learn more and treat you with tremendous respect. I am very optimisticfor the future.

VICKY LANGLOISSENIOR ASSISTANT MANAGERSOUTH KENSINGTON

FINE WINE STORESBelgravia, one of the stores with a new fine winedisplay area, features a comprehensive range of fine wines including Bordeaux first growths as wellas exclusive parcels of fine Burgundy, and otherprestigious wines at attractive prices.

th RightVicky won a scholarship at the 2006 Wine and Spirit Education Trust Awards of Excellence for an outstanding paper in her Diploma examination.

06MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006

REVIEW OF OPERATIONS

CORPORATE SALESCorporate sales represent over a quarter of UK sales. We continue to see realopportunities to expand this business and have increased our regional sales teamto thirteen. Their responsibility is to source new restaurant, hotel and businessaccounts with all subsequent logistics handled by the nearest Majestic store.

In addition to the regional structure, we have in London a dedicated depot andsales office near King’s Cross selling to larger corporate customers in the City and West End.

WINE AND BEER WORLDWe have experienced tough trading conditions and like for like sales declined7.1% on last year. The market in which we operate has suffered from a decline in day trip traffic. However we continue to see strong growth in the pre-orderingof wines before travelling to France for collection from our stores. Customers mayorder via our website, wineandbeer.co.uk, or over the telephone and togetherthese account for just over 25% of sales.

FUTURE PROSPECTSWe believe that Majestic is in a strong position to continue to expand marketshare and has the potential to trade from around 200 locations in the UK. We are encouraged by our ability to attract new customers and continue to see good potential for the future growth of Majestic.

NEW STORESWe opened six new stores during the financial year in Sanderstead, TunbridgeWells, Derby, Berkhamsted, Stow-on-the-Wold and Stirling. In addition we re-sited our store in Gloucester. We are pleased with the sales achieved at allthese stores.

We expect to increase the rate of new store openings during the coming year.Since the year end we have re-sited Cardiff and Tunbridge Wells and by the endof June will have opened in Bicester and East Molesey, giving us 129 stores inthe UK. We also have a number of other locations in advanced stages ofnegotiation. We now own 30 freehold sites of which two are in development for opening later in the year.

INTERNETWe have seen a further substantial increase in the number of orders placed overour website, www.majestic.co.uk, up 38% on last year. Web based transactionsnow represent 5.7% of UK retail sales. We recognise the opportunity that theinternet gives us to communicate with our customers more frequently. To this endwe have worked hard to improve collection of email addresses when customersvisit our stores, so that we now have in excess of 100,000, double the number a year ago.

We continue to increase the range of services offered over the internet. Early in the year we switched our “en primeur” service to a fully web basedplatform backed by real time stock updates. This allowed customers to place “en primeur” orders online in the certain knowledge that their requests would befulfilled. In addition, we launched “Gift Solutions”, a next day gift delivery service, in November 2005. This facility proved successful and we will be promoting theservice in time for this year’s important festive season.

Good Poten tia l

AWARDSThis year we were delighted to win a number of awards includingthe prestigious Retail Week Speciality Retailer of the Year 2006.

Other awards received included the Drinks Business Award 2006 forOutstanding Contribution to Drinks Retailing, the Daily Telegraph/SageBusiness 2005 award for Best Website, the International Wine Challengeaward for High Street Retailer of the Year 2005 plus the OLN DrinksRetailing Award for Multiple Wine Retailer 2005.

majestic.co.ukWeb based transactions now represent 5.7% of UK retail sales and we were delighted to win the Daily Telegraph/Sage Business Best Website award in 2005.

Our email database is now in excess of 100,000 customersallowing us to communicate new promotional offers and thearrival of ‘special parcels’ of sought-after fine wines.

07MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 07

MAKING A DIFFERENCEMy Majestic story is one of ‘man and boy’. I started as a part-time employee justworking to get myself through university and pay the bills. I enjoyed the storeenvironment but in 2000, when the opportunity to become the Estates Manager in the Majestic Property Department came up, I leapt at the chance. Five years onin January 2006, I was delighted to be appointed Director of Property.

The challenges in this environment are so different to store management. We have quitespecific property requirements, namely 3,000 square feet with dedicated car parking onmain arterial routes in the right catchment areas. The degree of autonomy is satisfying but the real buzz comes when you manage to transform a tired car showroom or old pub into a new store. Openings are always special events but then the Company’s needs are ongoing which puts it all into perspective. You continually feel you can make a difference.

STUART WILLIAMSPROPERTY

STUART WILLIAMSPeop le, our Grea tes t Asset

WSET AWARDS OF EXCELLENCEOur comprehensive training programme is recognisedas being one of the best in the wine industry and 32%of Managers and Assistant Managers either hold or arestudying for the Wine and Spirit Education Trust (WSET)Diploma. No less than six of the coveted scholarshipsat the 2006 WSET Awards of Excellence were awardedto Majestic staff for outstanding papers.

TIM HOWCHIEF EXECUTIVE19 JUNE 2006

PROPERTY

SCOTLANDAYREDINBURGH CAUSEWAYSIDEEDINBURGH COMISTON ROADGLASGOW BEARSDENGLASGOW CHARING CROSSGLASGOW GIFFNOCKINVERNESSPERTHSTIRLING

NORTHBEVERLEYBIRKDALE SOUTHPORTCHESTERDARLINGTONHARROGATEKENDALLEEDS CENTRALLEEDS CHAPEL ALLERTONMANCHESTERNEWCASTLEPRESTONSHEFFIELDSTOCKPORTWARRINGTONWILMSLOWYORK

WALESCARDIFFSWANSEA

MIDLANDSBANBURYBICESTERBIRMINGHAM ACOCKS GREENBIRMINGHAM HAGLEY ROADDERBYLEICESTERMERE GREEN SUTTON COLDFIELDMILTON KEYNESNORTHAMPTONNOTTINGHAMOXFORDSTOURBRIDGESTOW-ON-THE-WOLDWOLVERHAMPTONWORCESTER

EASTCAMBRIDGEIPSWICHNORWICHPETERBOROUGH

SOUTH AND WESTBARNSTAPLEBATHBRISTOL BATH ROADBRISTOL FILTONCHELTENHAMCHICHESTERCHIPPENHAMCIRENCESTERDORCHESTEREXETERGLOUCESTERMARLBOROUGHNEWBURYPOOLESALISBURYSOUTHAMPTONSWINDONTAUNTONWINCHESTER

Where a re we?NEW STORESFrom top, left to rightStirling, Stow-on-the-Wold, Gloucester, Derby, Berkhamsted and Sanderstead.

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 0808MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006

SOUTH EASTAMERSHAMAYLESBURYBERKHAMSTEDBRIGHTON & HOVECAMBERLEYCHELMSFORDEAST GRINSTEADFARNHAMGUILDFORDHASLEMEREHIGH WYCOMBEHORSHAMMAIDENHEADMAIDSTONEREADINGREIGATEST. ALBANSSTEVENAGESUNNINGDALETUNBRIDGE WELLSWOKINGWOKINGHAM

LONDON AND INSIDE M25BATTERSEABELGRAVIABROMLEYBUSHEYCATFORDCHALK FARMCHISLEHURSTCITYCLAPHAMCROYDONCOVENT GARDENDOCKLANDSEALINGEAST MOLESEYENFIELDEPSOMFULHAMGIDEA PARKGREENWICHISLINGTONKINGSTONMARYLEBONE

MAYFAIRMUSWELL HILLNEW BARNETNOTTING HILL GATEPUTNEYRICHMONDROEHAMPTONRUISLIPSANDERSTEADSHEPHERDS BUSHSOUTH KENSINGTONST. JOHN’S WOOD

SURBITONTWICKENHAMUXBRIDGEVAUXHALLVINOPOLISWANSTEADWEYBRIDGEWIMBLEDON

FRANCECALAISCHERBOURGCOQUELLES

KEYRELOCATIONSNEW STORES

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 09MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 09

10MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006

DIRECTORSADVISERS

COMPANY SECRETARYNRE ALLDRITT ACMA

REGISTERED OFFICEMAJESTIC HOUSEOTTERSPOOL WAYWATFORDHERTS WD25 8WW

AUDITORSERNST & YOUNG LLP400 CAPABILITY GREENLUTON LU1 3LU

BANKERSBARCLAYS BANK PLCFLOOR 271 CHURCHILL PLACELONDON E14 5HP

NOMINATED ADVISER AND BROKERTEATHER & GREENWOOD LIMITEDBEAUFORT HOUSE15 ST. BOTOLPH STREETLONDON EC3A 7QR

FINANCIAL ADVISERCLOSE BROTHERSCORPORATE FINANCE10 CROWN PLACELONDON EC2A 4FT

SOLICITORSOSBORNE CLARKEONE LONDON WALLLONDON EC2Y 5EB

ROCHMAN LANDAU45 MORTIMER STREETLONDON W1W 8HJ

REGISTRARSCAPITA REGISTRARSTHE REGISTRYBOURNE HOUSE34 BECKENHAM ROADBECKENHAMKENT BR3 4TU

SIMON BURKEAged 47, was appointed non-executiveChairman in August 2005. He has servedon the Board as a non-executive Directorsince March 2000. He is Chairman ofIrish supermarket chain Superquinn.

JUSTIN APTHORPAged 44, was appointed to the Board as Buying Director in January 2006. He has managed our buying functionsince 2002.

HELEN KEAYSAged 42, was appointed a non-executiveDirector in November 2005. She is anon-executive Director of Chrysalis PLCand of Britannia Building Society. She chairs the remuneration committee.

STEVE LEWISAged 42, was promoted to ChiefOperating Officer in January 2006 withresponsibility for the Group’s tradingoperations. He was appointed to theBoard in 1998.

PAUL DERMODYAged 60, is a non-executive Director and was appointed to the Board inSeptember 2003. He is the former Chief Executive of De Vere Group PLC. He is a non-executive Director of AgaFoodservice Group PLC. He chairs the audit committee.

TIM HOWAged 55, is Chief Executive and was appointed to the Board in 1989. He is non-executive Deputy Chairman of Austin Reed Group plc and non-executive Chairman of Framlington AIM VCT plc.

NIGEL ALLDRITTAged 42, is Finance Director andCompany Secretary and was appointedto the Board in 2002. He is a CharteredManagement Accountant andresponsible for the finance and ITfunctions.

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 11MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006

DIRECTORS’ REPORTFOR THE YEAR ENDED 27 MARCH 2006

The Directors present their report and Group financial statements for the year ended 27 March 2006.

PRINCIPAL ACTIVITYThe principal activity of the business is the retailing of wines and beers.

RESULTS AND REVIEW OF THE BUSINESSThe Group Profit and Loss Account is set out on page 16.

The Directors’ Report should be read in conjunction with the Chairman’s Statement on pages 2 to 3 and the Review of Operations on pages 4 to 7 which includeinformation about the Group’s business performance during the year and indication of future prospects.

DIVIDENDSThe Directors propose that a final dividend of 5.1p net per Ordinary Share be paid which, together with an interim dividend of 1.9p paid on 6 January 2006, makes atotal of 7.0p (2005: 5.5p) per share for the year. The final dividend amounting to £3,308,000, if approved, will be paid on 11 August 2006 to the shareholders whosenames appear on the Register of Members at the close of business on 14 July 2006.

DIRECTORSThe Directors who served during the year and their interests in the Ordinary Share capital of the Company were:

Number of Ordinary Shares

2006 2005

TF How (note 1) 420,632 418,428SJ Lewis 40,091 38,860NRE Alldritt 56,356 18,680JJ Apthorp – appointed on 5 January 2006 (note 2) 762,971 762,971*SP Burke 8,000 8,000PB Dermody (note 3) 7,000 2,000H Keays – appointed on 1 November 2005 – –JD Apthorp – retired on 5 August 2005 (note 4) 9,636,976 9,636,976

* As at date of appointment.

Notes:1) 209,644 of the Ordinary Shares that TF How has an interest in are held in his own name, 190,988 are held by his wife EM How and 20,000 are held jointly.

2) 38,971 of the Ordinary Shares that JJ Apthorp has an interest in are held in his own name, 24,000 are held by his wife S Apthorp and 700,000 are held by Meespiersen.

3) 2,000 of the Ordinary Shares that PB Dermody has an interest in are held in his own name and 5,000 are held by his wife ME Dermody.

4) JD Apthorp has a beneficial interest in 1,658,600 Ordinary Shares. He holds 58,600 in his own name and 1,600,000 are held by his wife J Apthorp. In addition, JD Apthorp also has a non-beneficial interest in 7,978,376 Ordinary Shares that are held by the P&L Trust Company Limited.

SP Burke, PB Dermody and H Keays are non-executive Directors.

A proposal to confirm the appointments of H Keays and JJ Apthorp will be put to the Annual General Meeting.

In accordance with the Company’s Articles of Association TF How retires by rotation and, being eligible, offers himself for re-election.

The Group has provided to all of its Directors limited indemnities in respect of costs of defending claims against them and third party liabilities.

MAJOR SHAREHOLDERSAt 5 June 2006 the following interests of shareholders in excess of 3%, have been notified to the Company.

Number of Ordinary Shares as %Ordinary Shares held of issued share capital

P&L Trust Company Limited 7,978,376 12.29Fidelity Investments 5,729,599 8.83Artemis Investment Management 3,609,933 5.56AXA Framlington Investment Managers 2,807,016 4.32F&C Asset Management 2,387,798 3.68Standard Life Investments 2,028,916 3.13

CORPORATE GOVERNANCEThe Board has established a remuneration committee and an audit committee.

REMUNERATION COMMITTEEThe remuneration committee consists of the Chairman and the two non-executive Directors. It is chaired by H Keays and meets as required during the year. The committee determines the remuneration and benefits of the executive Directors. The executive Directors have rolling one year contracts subject to one year’snotice on either side. The remuneration of non-executive Directors is determined by the Board within the limits set by the Company’s Articles of Association. Theyhave letters of engagement with the Company and their appointments are terminable on three months written notice on either side.

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 12

DIRECTORS’ REPORTFOR THE YEAR ENDED 27 MARCH 2006

SHARE OPTION SCHEMESThe Group operates executive share option schemes (one of which is an Inland Revenue Company Approved Share Option Scheme and one which is unapproved for tax purposes) in which the Directors and managers participate. The Group also operates a savings related share option scheme that is available to all Groupemployees, and conforms to Inland Revenue rules. The committee determines the allocation of options for both share schemes and the awards made for the co-investment plan and the deferred bonus scheme.

The executive Directors’ participation in the Group’s executive share option schemes is limited such that they are eligible to receive options over shares in value up to a maximum of two times gross salary at the date of grant which will only become exercisable on the achievement of performance criteria determined by theremuneration committee. During the year TF How, NRE Alldritt and SJ Lewis were granted options over 50,000 shares each at an exercise price of £2.635 per share.The options will vest at the end of a three year holding period, provided fully diluted earnings per share shows a 5% compound growth in excess of the growth in theretail prices index (excluding mortgage interest payments) over the three year period. If the condition is not met the options will lapse.

The executive share option schemes and the savings related share option scheme expire in October 2006. The Directors believe in a policy of offering all employeesan equity participation in the Company. This policy has proven to be an effective means of motivating and retaining staff. Accordingly a resolution will be put to theAnnual General Meeting, which seeks approval to renew the current schemes which have been updated to take into account certain institutional guidelines, tax andregulatory requirements.

CO-INVESTMENT PLANThe Company operates an annual cash bonus and co-investment plan for the executive Directors. The performance criteria set by the remuneration committee for theannual bonus scheme for the year ended 27 March 2006 were not achieved. The remuneration committee has determined that as an annual cash bonus was notearned this year, participants will not be invited to invest in the co-investment plan.

Three executive Directors, TF How, NRE Alldritt and SJ Lewis, were entitled to a combined cash award of £238,000 under the terms of the annual bonus scheme forthe year ended 28 March 2005. The remuneration committee determined that they be required to invest a minimum of 25% of their net annual bonus to acquireshares, which must be held in the co-investment plan. The participants also invested additional bonuses in shares on a voluntary basis such that the total valueinvested was 60% of their respective gross salaries. The shares invested are to be held in the plan for three years. At the end of the period, provided participants arestill employed within the Group and dependent upon the performance of the Group in terms of total shareholder return as measured against a basket of comparatorcompanies, they may be awarded free shares up to a maximum award of one and a half free shares for every share invested. The total amount payable under thescheme is capped at one and a half times gross salary in any one year. The participants were issued with nil cost options in proportion to the number of shares thatthey invested in the plan and equal to the maximum possible matching award under the terms of the plan.

The Directors’ interests in share options are as follows:

Market Date fromOptions at Options Options Options at Exercise price at date which Expiry

28.03.05 granted exercised 27.03.06 price of exercise exercisable date

TF How 200,000 – – 200,000 £1.145 – 09.07.05 08.07.094,396 – – 4,396 £1.2625 – 01.09.06 28.02.071,904 – – 1,904 £1.99 – 01.03.08 31.08.08

– 11,380 – 11,380 £2.635 – 25.07.08 25.07.15– 38,620 – 38,620 £2.635 – 25.07.08 24.07.15– 73,275 – 73,275 nil – 25.07.08 24.07.15

NRE Alldritt 26,200 – 26,200 – £1.145 £2.56 09.07.05 09.07.1293,800 – 28,800 65,000 £1.145 £2.56 09.07.05 08.07.0910,380 – 10,380 – £0.915 £2.655 26.07.05 25.01.06

– 11,380 – 11,380 £2.635 – 25.07.08 25.07.15– 38,620 – 38,620 £2.635 – 25.07.08 24.07.15– 34,482 – 34,482 nil – 25.07.08 24.07.15– 4,192 – 4,192 £2.23 – 01.03.09 31.08.09

SJ Lewis 4,840 – – 4,840 £0.76875 – 22.12.01 22.12.087,000 – 7,000 – £0.60625 £2.56 24.11.03 24.11.10

100,000 – 21,250 78,750 £1.145 £2.56 09.07.05 08.07.094,396 – – 4,396 £1.2625 – 01.09.06 28.02.071,904 – – 1,904 £1.99 – 01.03.08 31.08.08

– 9,970 – 9,970 £2.635 – 25.07.08 25.07.15– 40,030 – 40,030 £2.635 – 25.07.08 24.07.15– 37,930 – 37,930 nil – 25.07.08 24.07.15

JJ Apthorp 4,761* – – 4,761 £1.99 – 01.03.08 31.08.08

* At date of appointment

The market value of the Company’s shares at 27 March 2006 was 330.5p. The highest and lowest prices during the year were 330.5p and 220.0p respectively.

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006

DIRECTORS’ REPORTFOR THE YEAR ENDED 27 MARCH 2006

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 13

DEFERRED BONUS SCHEMEThe Group operates a Deferred Bonus Scheme for senior managers, which excludes the executive Directors.

It involves the award of bonus shares to participants subject to meeting performance criteria that are set annually by the remuneration committee. Any bonus sharesawarded in this manner are held on behalf of participants by the trustee of the Company’s employee share ownership trust for a 2 year deferral period. At the end ofthat period, participants have a right to receive loyalty shares of equivalent number provided that they are still in employment. Some or all of the bonus shares maybe paid in cash if participants request, but this is only at the discretion of the trustee. Participants who are paid cash in this manner forfeit their entitlement to loyaltyshares.

The performance criteria set by the remuneration committee for the financial year ended 27 March 2006 were not met and therefore participants are not entitled toan award of bonus shares.

AUDIT COMMITTEEThe audit committee consists of the Chairman and the two non-executive Directors. It is chaired by PB Dermody. The other Directors attend by invitation. It meetsas required during the year, at least once with the Group’s external auditors. Its role is to review the interim and final financial statements for approval by the Board,to ensure that appropriate financial and operating controls are functioning properly and to provide the forum through which the Group’s external auditors report tothe Board.

INTERNAL CONTROLSThe Directors are responsible for the Group’s internal controls, and have established a framework intended to provide reasonable, but not absolute, assuranceagainst material financial misstatement or loss.

The principal operating company Majestic Wine Warehouses Limited is managed by a board of twelve executive directors, four of whom are also executive Directorsof Majestic Wine PLC. They are responsible for the day to day management of operations.

FINANCIAL REPORTINGThe Group’s trading performance is monitored on an ongoing basis. An annual budget is prepared and specific objectives and targets are set. The budget isreviewed and approved by the Board. The key trading aspects of the business are monitored weekly and internal management and financial accounts are preparedquarterly. The results are compared to budget and prior year performance.

STORE CONTROL ENVIRONMENTOperating procedures for control of store operations are clearly documented and set out in operation manuals. Senior operational managers are responsible for theimplementation of these procedures and compliance is monitored.

RISK MANAGEMENTThe risks facing the business are assessed on an ongoing basis. The executive Directors evaluate the likelihood and potential impact of each risk and ensureappropriate action is taken to mitigate them. A number of key risk areas such as treasury management including the use of forward currency contracts to mitigateforeign currency exposures, capital expenditure, insurance, health and safety, and regulatory compliance, come under the direct control of the executive Directors.Further information relating to interest rate and foreign currency risk is given in note 23 of the accounts.

CHARITABLE AND POLITICAL DONATIONSCharitable donations made in the year amounted to £29,000. The largest beneficiaries were Leukaemia Research at £21,000 and Comic Relief Wine Relief at£7,000. The Company made no political donations during the year.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTSThe Directors are responsible for preparing the annual report and the financial statements in accordance with applicable United Kingdom Law and United KingdomGenerally Accepted Accounting Practice. In preparing those financial statements, the Directors are required to:– select suitable accounting policies and then apply them consistently;– make judgements and estimates that are reasonable and prudent; and– state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and toenable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Group andhence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 14

DIRECTORS’ REPORTFOR THE YEAR ENDED 27 MARCH 2006

EMPLOYEESThe Directors recognise the value of involving employees in the business and ensure that matters of concern to them, including the Group’s aims and objectives arecommunicated in an open and regular manner. Employees are kept informed of the Group’s performance and activities by regular briefings. Directors and seniormanagers visit stores frequently to brief staff and discuss matters of concern or interest. The Group’s senior staff participate in the Group’s share option schemes,and the Deferred Bonus Scheme. Recruitment and training development policies give equal opportunity to all employees regardless of sex, colour, race, religion orethnic origin. The Group’s policy is to recruit disabled workers for those vacancies that they are able to fill. The Group uses its best endeavours to continue toemploy persons who become disabled during their employment. Training programmes are held for all levels of staff. These are aimed at increasing skills andcontribution with particular emphasis placed on product knowledge and customer service skills.

PAYMENT OF SUPPLIERSThe Group does not follow any formal code of practice for payment of its suppliers. The Group’s current policy concerning the payment of the majority of its tradecreditors is to:

(a) agree the terms of payment with suppliers when agreeing the terms of business;(b) ensure that those suppliers are made aware of the terms of payment by inclusion of the relevant terms on purchase orders; and (c) pay in accordance with the terms agreed.

The average credit period taken during the year by the Group was 81 days (2005: 81 days). The Company has no trade creditors.

GOING CONCERNThe Board is satisfied that the Group has adequate financial resources to continue to operate for the foreseeable future and is financially sound. For this reason, the going concern basis is considered appropriate for the preparation of financial statements.

AUDITORSA resolution to reappoint Ernst & Young LLP will be put to the Annual General Meeting. The Directors will also be given the authority to fix the auditor’s remuneration.

By Order of the Board

NRE Alldritt ACMASecretary

Majestic HouseOtterspool WayWatford WD25 8WW

19 June 2006

Registered in England and Wales No. 2281640

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006

AUDIT REPORTFOR THE YEAR ENDED 27 MARCH 2006

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 15

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF MAJESTIC WINE PLC

We have audited the Group and parent Company financial statements (the “financial statements”) of Majestic Wine PLC for the year ended 27 March 2006 whichcomprise the Group Profit and Loss Account, the Group Statement of Total Recognised Gains and Losses, Group and Company Balance Sheets, the Group CashFlow Statement and associated notes, Accounting Policies and the related notes 1 to 23. These financial statements have been prepared under the accountingpolicies set out therein.

This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken sothat we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for thisreport, or for the opinions we have formed.

Respective responsibilities of Directors and AuditorsThe Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and AccountingStandards (United Kingdom Generally Accepted Accounting Practice) as set out in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK andIreland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985.We also report to you if, in our opinion, the Directors’ Report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and othertransactions is not disclosed.

We read other information contained in the Annual Report, and consider whether it is consistent with the audited financial statements. This other informationcomprises the Directors’ Report, Chairman’s Statement and Review of Operations. We consider the implications for our report if we become aware of any apparentmisstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of audit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination,on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates andjudgments made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s and Company’scircumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficientevidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

OpinionIn our opinion the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of theGroup’s and the parent Company’s affairs as at 27 March 2006 and of the Group’s profit for the year then ended; and the financial statements have been properlyprepared in accordance with the Companies Act 1985.

Ernst & Young LLPRegistered AuditorLuton

19 June 2006

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 16

GROUP PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 27 MARCH 2006

Year to Year to 27.03.06 28.03.05

Note £000 £000

TURNOVER 172,195 162,517Cost of sales (135,689) (128,436)

GROSS PROFIT 36,506 34,081Distribution costs (14,004) (13,103)Administrative costs (8,959) (8,760)Other operating income 469 440

OPERATING PROFIT 1 14,012 12,658Profit on disposal of fixed assets 3 115 88

PROFIT ON ORDINARY ACTIVITIES BEFORE INTEREST AND TAXATION 14,127 12,746Net interest receivable 4 81 144

PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 14,208 12,890Taxation 5 (3,727) (4,347)

PROFIT FOR THE YEAR 21 10,481 8,543

EARNINGS PER SHAREBasic 6 16.3p 13.6pDiluted 6 16.0p 13.2p

UNDERLYING EARNINGS PER SHAREBasic 6 16.7p 14.0pDiluted 6 16.4p 13.6p

GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 27 MARCH 2006

Year to Year to 27.03.06 28.03.05

£000 £000

PROFIT FOR THE YEAR ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY 10,481 8,543Currency translation differences on foreign currency net investments 19 71

TOTAL GAINS AND LOSSES RELATING TO THE YEAR 10,500 8,614

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 16

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 17

BALANCE SHEETSAS AT 27 MARCH 2006

Group Group Company Company27.03.06 28.03.05 27.03.06 28.03.05

Note £000 £000 £000 £000

FIXED ASSETSIntangible fixed assets 8 5,765 6,135 – –Tangible fixed assets 9 35,420 29,347 – –Investments 10 – – 12,021 12,021

Total fixed assets 41,185 35,482 12,021 12,021

CURRENT ASSETSStocks 11 28,722 27,798 – –Debtors 12 6,116 3,926 8,896 7,586Cash at bank and in hand 5,916 7,840 – –

Total current assets 40,754 39,564 8,896 7,586

CREDITORS:Amounts falling due within one year 13 (34,385) (35,417) – –

NET CURRENT ASSETS 6,369 4,147 8,896 7,586

TOTAL ASSETS LESS CURRENT LIABILITIES 47,554 39,629 20,917 19,607

CREDITORS: Amounts falling due after more than one year 14 – – (2,000) (2,000)Provision for liabilities and charges 15 (395) (297) – –

NET ASSETS 47,159 39,332 18,917 17,607

CAPITAL AND RESERVESCalled up share capital 16 4,864 4,776 4,864 4,776Share premium account 21 8,371 6,750 8,371 6,750Revaluation reserve 21 22 22 – –Capital reserve – own shares 21 (391) (407) – –Profit and loss account 21 34,293 28,191 5,682 6,081

EQUITY SHAREHOLDERS’ FUNDS 47,159 39,332 18,917 17,607

The financial statements were approved by the Board on 19 June 2006 and signed on its behalf by:

SP BurkeChairman

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 17

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 18

GROUP CASH FLOW STATEMENTFOR THE YEAR ENDED 27 MARCH 2006

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 18

Year to Year to27.03.06 28.03.05

£000 £000

NET CASH INFLOW FROM OPERATING ACTIVITIES 13,826 16,896

RETURNS ON INVESTMENTS AND SERVICING OF FINANCEInterest paid (74) (12)Interest received 170 145

96 133

TAXATIONUK corporation tax paid (3,982) (3,416)Overseas corporation tax paid (715) (927)

(4,697) (4,343)

CAPITAL EXPENDITUREPayments to acquire tangible fixed assets (8,971) (7,709)Receipts from sales of tangible fixed assets 519 764

Net cash outflow from capital expenditure (8,452) (6,945)

Equity dividends paid (3,785) (2,846)

NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING (3,012) 2,895

FINANCINGIssue of Ordinary Share capital 877 516Receipt for exercise of share options satisfied by QUEST 199 9

(DECREASE)/INCREASE IN CASH FOR THE YEAR (1,936) 3,420

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 19

NOTES TO THE GROUP CASH FLOW STATEMENTFOR THE YEAR ENDED 27 MARCH 2006

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 19

RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING ACTIVITIESYear to Year to

27.03.06 28.03.05£000 £000

OPERATING PROFIT 14,012 12,658

Depreciation charges 2,519 2,183Amortisation charge 370 370(Profit)/loss on disposal of tangible fixed assets (18) 58Increase in stocks (924) (4,221)(Increase)/decrease in debtors (2,230) 2,042(Decrease)/increase in creditors (37) 3,537Increase/(decrease) in provisions 98 (45)Deferred bonus payable in shares (15) 314Co-investment plan payable in shares 51 –

NET CASH INFLOW FROM OPERATING ACTIVITIES 13,826 16,896

ANALYSIS OF NET FUNDS

Total

As at 29 March 2004 4,376Cash inflow 3,420Exchange differences 44

At 28 March 2005 7,840Cash outflow (1,936)Exchange differences 12

Net funds at 27 March 2006 5,916

RECONCILIATION OF NET CASH FLOW TO NET FUNDS

Year to Year to27.03.06 28.03.05

£000 £000

(Decrease)/increase in cash (1,936) 3,420Exchange differences 12 44

Movement in net funds (1,924) 3,464Net funds at 28 March 2005 7,840 4,376

NET FUNDS AT 27 MARCH 2006 5,916 7,840

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 20

ACCOUNTING POLICIES

Accounting PoliciesThe financial statements have been prepared in accordance with applicable financial reporting and accounting standards in the United Kingdom. A summary of themore important policies is set out below:

(a) Basis of preparationThe financial statements are prepared under the historical cost convention, modified to include the revaluation of freehold and long leasehold land and buildings.

The transitional arrangements under FRS 15 in respect of revaluation have been adopted, and the valuation has not been updated.

Changes in accounting policyThe accounting policies applied are the same as in the previous financial year except that the Group has adopted FRS 21 – Events after the balance sheet date, FRS 22 – Earnings per share, the presentation requirements of FRS 25 – Financial instruments: disclosure and presentation and FRS 28 – Corresponding amounts.

FRS 21 – Events after the balance sheet date requires that dividends, which are proposed after the balance sheet date to be disclosed and not recognised as a liability.As a result of the adoption of this accounting standard, retained earnings have been increased by £2,550,000 as at 28 March 2005, and increased by £1,896,000 as at 29 March 2004. Liabilities have been decreased by £2,550,000 as at 28 March 2005. There has been no effect on reported profit after tax for either year.

The adoption of FRS 22 – Earnings per share, the presentation requirements of FRS 25 – Financial instruments: disclosure and presentation and FRS 28 –Corresponding amounts have not resulted in a restatement of retained earnings and have had no impact on the results or net assets for the current or prior year.

(b) Basis of consolidationThe consolidated financial statements incorporate the results and net assets of the Company and its subsidiary undertakings drawn up to the nearest Monday to 31 March each year. No profit and loss account is presented for Majestic Wine PLC as permitted by Section 230 of the Companies Act 1985.

(c) GoodwillPositive goodwill arising on acquisitions is capitalised, classified as an asset on the balance sheet and amortised on a straight line basis over its estimated usefuleconomic life up to 20 years. It is reviewed for impairment at the end of the first financial year following acquisition, and if events or changes in circumstances indicatethat the carrying value may not be recoverable.

Goodwill arising on the acquisition of subsidiaries prior to 31 December 1997 was written off immediately against reserves. This has not been reinstated on theimplementation of FRS 10.

If a subsidiary business is subsequently sold, any goodwill arising on acquisition that has not been amortised through the profit and loss account is taken into accountin determining the profit or loss on sale or closure.

(d) DepreciationDepreciation is calculated to write off the cost or valuation of fixed assets on a straight line basis over the expected useful economic lives of the assets concerned.The principal annual rates used for this purpose are:

%

Freehold buildings 2Long leasehold buildings 2Fixtures and fittings 10Computer equipment 20Vehicles 20

Freehold land is not depreciated.

The costs of short leasehold properties and improvements are amortised over the period of the lease.

The carrying values of tangible fixed assets are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

(e) StocksStocks are stated at the lower of cost and net realisable value. Cost is determined on a first in, first out basis and includes carriage and duty costs.

(f) Foreign currenciesTransactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the contracted rate if the transaction is covered by a forwardforeign currency contract. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date orif appropriate at the forward contract rate. All differences are taken to the profit and loss account.

The profit and loss accounts of overseas subsidiary undertakings are translated at the average rate of exchange ruling during the year. The balance sheets of the overseas subsidiary undertakings are translated into sterling at the rate of exchange ruling at the balance sheet date. Differences between the profit and lossaccounts translated at average rates and at balance sheet rates and differences arising on the retranslation of opening net assets of overseas subsidiaries are shownas a movement in reserves and in the statement of total recognised gains and losses. All other translation differences are taken to the profit and loss account.

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 21

ACCOUNTING POLICIES

(g) Deferred taxationDeferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events haveoccurred at that date that will result in an obligation to pay more, or right to pay less or to receive more tax, with the following exceptions:

– Provision is made for tax on gains from the revaluation (and similar fair value adjustments) of fixed assets, or gains on the disposal of fixed assets that have beenrolled over into replacement assets, only to the extent that, at the balance sheet date, there is a binding agreement to dispose of the assets concerned. However,no provision is made where, on the basis of all available evidence at the balance sheet date, it is more likely than not that the taxable gain will be rolled over intoreplacement assets and charged to tax only where the replacement assets are sold.

– Provision is made for the tax that would arise on remittances on retained earnings of overseas subsidiaries only to the extent that, at balance sheet date, dividendshave been accrued as receivable.

– Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from whichthe underlying timing differences can be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax ratesand laws enacted or substantively enacted at the balance sheet date.

(h) PensionsThe Group contributes to the personal pension plans of certain staff. Amounts paid into the plan are charged to the profit and loss account in the period in which they arise.

(i) TurnoverTurnover represents goods sold to customers, less returns, net of value added tax. Turnover is attributable to one continuing activity and represents the sales ofwines, beers, spirits and other related retail items arising within the United Kingdom and France.

No segmental analysis is provided within these accounts as in the opinion of the Directors any of the required disclosure would be prejudicial to the interests of the Group.

(j) LeasesRent paid in respect of operating leases is charged to the profit and loss account on a straight line basis over the term of the lease.

(k) Derivative instrumentsThe Group uses forward foreign currency contracts to reduce exposure to foreign exchange rates.

The Group considers its derivative instruments qualify for hedge accounting when certain criteria are met.

The criteria for forward foreign currency contracts are:– The instrument must be related to a foreign currency asset or liability that is probable and whose characteristics have been identified;– It must involve the same currency as the hedged item; and– It must reduce the risk of foreign currency exchange movements on the Group’s operations.

The rates under such contracts are used to record the hedged item. As a result, gains and losses are offset against the foreign exchange gains and losses on therelated financial assets and liabilities, or where the instrument is used to hedge a committed, or probable future transaction, are deferred until the transaction occurs.

(l) SAYE schemeThe Company has applied the exemptions contained within UITF 17, Employee Share Schemes, not to recognise a charge in respect of grants of options under theSAYE scheme.

(m) Employee Share Ownership TrustDividends on the shares held by the trust, the purchase of which was funded by a contribution to the trust from Majestic Wine Warehouses Limited, are not waived.The shares are issued to the trust by Majestic Wine PLC. All expenses incurred by the trust are settled directly by Majestic Wine Warehouses Limited and charged inthe accounts as incurred.

(n) QUESTDividends on the shares held by the trust, the purchase of which was funded by a contribution to the trust from Majestic Wine Warehouses Limited, are waived. Theshares are issued to the trust by Majestic Wine PLC. All expenses incurred by the trust are settled directly by Majestic Wine Warehouses Limited and charged in theaccounts as incurred.

(o) Co-investment planThe Company has applied UITF 17, Employee Share Schemes to recognise a charge in respect of the nil cost options granted under the co-investment plan. Thecharge recognised in the profit and loss is the difference between the market price at the date of the grant and the grant price of the number of options expected tovest amortised over the three year holding period.

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 22MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 22

NOTES TO THE FINANCIAL STATEMENTS

1. OPERATING PROFITYear to Year to

27.03.06 28.03.05£000 £000

Operating profit is stated after charging/(crediting):Depreciation 2,519 2,183Amortisation 370 370Operating lease rentals – plant and machinery 603 581

– other 5,241 4,961(Profit)/loss on disposal of fixed assets (18) 58

Auditors’ remuneration:in respect of audit– Company 5 5– Group 58 49for non-audit services 22 20

No audit fee has been charged in Majestic Wine PLC. The charge has been borne by a subsidiary company.

2. EMPLOYEE INFORMATION

The average monthly number of employees (including Directors) during the year was as follows:

2006 2005

Head office, including distribution 103 97Store staff 612 586

715 683

Staff costs for the above employees during the year amounted to:Year to Year to

27.03.06 28.03.05£000 £000

Wages and salaries 14,751 14,330Social security costs 1,736 1,647Pension costs 220 230

16,707 16,207

Directors’ emoluments2006 2005£000 £000

Salary and benefits 663 661Bonus – current year – 238Deferred bonus in respect of the 2003 financial year 95 114

Aggregate emoluments 758 1,013

Gain made on exercise of share options 140 465Company pension contributions to money purchase schemes for four Directors 79 95

Highest paid DirectorSalary and benefits 281 228Bonus – current year – 106Deferred bonus in respect of the 2003 financial year 46 52

Aggregate emoluments 327 386

Gain made on exercise of share options – 174Company pension contributions to money purchase scheme 32 31

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 23MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 23

NOTES TO THE FINANCIAL STATEMENTS

3. PROFIT ON DISPOSAL OF FIXED ASSETSDuring the year the leaseholds to three residential flats above freehold properties in Roehampton and Bromley were sold for £465,000 realising an exceptional gain of£115,000. In the prior year the leaseholds to five residential flats above freehold properties in Roehampton and Wilmslow were sold for £738,000 realising anexceptional gain of £88,000.

4. NET INTEREST RECEIVABLE/(PAYABLE)Year to Year to

27.03.06 28.03.05£000 £000

Interest on bank overdrafts and other loansrepayable within five years, not by instalments (74) (19)Bank interest receivable 155 163

81 144

5. TAXATION

a) Analysis of the tax charge in the year.The charge based on the profit for the year comprises:

Year to Year to 27.03.06 28.03.05

£000 £000

Taxation on profit on ordinary activitiesUK corporation tax 3,424 3,557Adjustment in respect of the previous year (393) 12Overseas corporation tax on subsidiary undertaking 644 688

Total current tax 3,675 4,257

UK deferred tax:Origination and reversal of timing differences 52 90

Total deferred tax 52 90

Tax on profit on ordinary activities 3,727 4,347

b) Factors affecting the tax charge for the year based on profit on ordinary activities pre tax of £14,208,000 (2005: £12,890,000).

27.03.06 28.03.05% %

Corporation tax at the statutory rate 30.00 30.00

Effects of:Overseas tax in excess of 30% rate 0.45 0.65Expenses not deductible for tax purposes 0.22 (0.04)Profit on sale of assets not qualifying for capital allowances (0.05) (0.16)Accounting depreciation not eligible for tax purposes 1.53 1.32Adjustment relating to market value change in deferred bonus scheme (0.26) (0.56)Adjustment relating to the market value of exercised share options (3.97) –Capital gains – 0.21Utilisation of losses – (0.08)Goodwill amortisation not deductible for tax purposes 0.78 0.86Accounting depreciation in excess of tax depreciation (0.02) 0.37Adjustments relating to prior years’ corporation tax (2.77) 0.09Other timing differences (0.05) 0.36

Total current tax rate 25.86 33.02

Origination and reversal of deferred tax timing difference 0.37 0.70

Total tax rate 26.23 33.72

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 24

NOTES TO THE FINANCIAL STATEMENTS

c) Factors that may affect future tax chargesNo provision has been made for deferred tax where potentially taxable gains have been rolled over into replacement assets. Such gains would become taxable only ifthe assets were sold without it being possible to claim rollover relief. The amount not provided is £330,000 (2005: £330,000) in respect of this. At present, it is notenvisaged that this potential tax liability will become payable in the foreseeable future.

The tax charge recognised in the current year includes a credit of £408,000 relating to a prior year adjustment as a result of the exercise of employee share options.

The Group’s overseas tax rate is higher than that in the UK as profits earned by Les Celliers de Calais S.A.S. in France are taxed at a rate of 34.3% (2005: 34.4%).

No deferred tax is recognised on the unremitted earnings of overseas subsidiaries as the Group has no liability to additional taxation should such amounts be remitteddue to the availability of double taxation relief.

d) Deferred taxation (Group)Deferred taxation has been provided in the accounts as follows:

Provided Unprovided

27.03.06 28.03.05 27.03.06 28.03.05£000 £000 £000 £000

Excess of tax allowances over depreciation 152 138 – –Short term timing differences (140) (178) – –Capital gain rolled over – – 330 330

Deferred tax liability/(asset) 12 (40) 330 330

e) The movement in the deferred tax balance was:Deferred

tax asset/(liability)

£000

Balance at 28 March 2005 40

Charged to profit and loss during year (43)Adjustment in respect of prior years (9)

Balance at 27 March 2006 (12)

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 25

NOTES TO THE FINANCIAL STATEMENTS

6. EARNINGS PER SHARE

The calculations of earnings per Ordinary Share are based upon profits after taxation of £10,481,000 (2005: £8,543,000). Underlying earnings per share has beencalculated in addition to the earnings per share required by FRS 22 earnings per share to allow shareholders to gain a clearer understanding of the tradingperformance of the Group. Underlying earnings per share is calculated on earnings, before charging amortisation of goodwill and the exceptional profit on disposal offreehold property, of £10,736,000 (2005: £8,825,000).

2006 2005

Profit on ordinary activities after taxation £10,481,000 £8,543,000Amortisation of goodwill arising on acquisition £370,000 £370,000Exceptional profit on disposal of freehold property £(115,000) £(88,000)

Underlying earnings £10,736,000 £8,825,000

The number of Ordinary Shares used in the diluted earnings per share is calculated as follows:2006 2005

Basic weighted average number of shares 64,210,980 62,893,489Dilutive potential Ordinary Shares:Employee share options 1,166,275 2,033,916

65,377,255 64,927,405

Reconciliation of basic earnings to basic underlying earnings per Ordinary Share:2006 2005

Basic earnings per Ordinary Share 16.3p 13.6pAmortisation of goodwill arising on acquisition 0.6p 0.6pExceptional profit on disposal of freehold property (0.2)p (0.2)p

Underlying earnings per Ordinary Share 16.7p 14.0p

Reconciliation of diluted earnings to diluted underlying earnings per Ordinary Share:2006 2005

Diluted earnings per Ordinary Share 16.0p 13.2pAmortisation of goodwill arising on acquisition 0.6p 0.6pExceptional profit on disposal of freehold property (0.2)p (0.2)p

Underlying earnings per Ordinary Share 16.4p 13.6p

7. DIVIDENDS PAID AND PROPOSED2006 2005

Equity dividends on Ordinary Shares declared and paid during the year:Final dividend for 2005: 4.0p (2004 – 3.0p) 2,554 1,892Interim for 2006: 1.9p (2005 – 1.5p) 1,231 954

Equity dividends paid 3,785 2,846

Proposed for approval by shareholders at the AGM:Final dividend for 2006: 5.1p (2005 – 4.0p) 3,308 2,554

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 26

NOTES TO THE FINANCIAL STATEMENTS

8. INTANGIBLE FIXED ASSETS GROUP

Goodwill£000

Cost at 27 March 2006 and 28 March 2005 7,415

Amortisation:At 28 March 2005 1,280Amortisation provided during the year 370

At 27 March 2006 1,650

Net Book Value:At 27 March 2006 5,765

At 28 March 2005 6,135

The goodwill arising on the acquisition of Les Celliers de Calais S.A.S. is being amortised on a straight line basis over 20 years, which the Directors believe to be itsuseful economic life.

9. TANGIBLE FIXED ASSETS GROUP

Land and Buildings

EquipmentLong Short Fittings &

Freehold Leasehold Leasehold Vehicles Total£000 £000 £000 £000 £000

Cost or valuation:At 28 March 2005 17,349 439 8,582 12,210 38,580Additions 5,451 – 843 2,677 8,971Retranslation – – 6 6 12Disposals (350) – (209) (1,895) (2,454)

At 27 March 2006 22,450 439 9,222 12,998 45,109

Depreciation:At 28 March 2005 585 21 2,592 6,035 9,233Charge for year 183 4 594 1,738 2,519Retranslation – – 2 3 5Disposals – – (209) (1,859) (2,068)

At 27 March 2006 768 25 2,979 5,917 9,689

Net book value:at 27 March 2006 21,682 414 6,243 7,081 35,420

at 28 March 2005 16,764 418 5,990 6,175 29,347

The freehold and long lease properties, which the Group occupied at 31 July 1996, were valued independently at £1,430,000 on the basis of existing use value.Subsequent additions are included at acquisition cost. Freehold land and buildings includes £11,294,000 (2005: £8,343,000) in respect of land that is not depreciated.

27.03.06 28.03.05£000 £000

The historical costs of the assets revalued are as follows:Freehold properties 1,195 1,195Long leasehold properties 213 213

1,408 1,408

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 27

NOTES TO THE FINANCIAL STATEMENTS

10. INVESTMENTSCOMPANY

27.03.06 28.03.05£000 £000

Shares in Group undertakings at cost 12,021 12,021

The Company owns the following:i) 100% of the share capital of Wharfside Wine PLC, an investment company, registered in England and Wales, which is no longer trading.ii) 100% of the ordinary share capital of Majestic Wine Warehouses Limited, a company registered in England and Wales, whose principal activity is the retailing of

wines and beers.iii) 100% of the ordinary share capital of Majestic Wine Employee Share Ownership Trust Limited, a company registered in England and Wales, whose principal

activity is acting as a discretionary trust for the benefit of the Group’s employees.iv) 100% of the ordinary share capital of Majestic Wine Card Services Limited, a dormant company registered in England and Wales.v) 100% of the ordinary share capital of Les Celliers de Calais S.A.S., a company registered in France, whose principal activity is the retailing of wines and beers.vi) 100% of the ordinary share capital of Wine and Beer World Limited, a dormant company registered in England and Wales.vii) 100% of the ordinary share capital of Majestic Wine QUEST Trustees Limited, a company registered in England and Wales, whose principal activity is acting

as a discretionary trust for the benefit of the Group’s employees. viii) Through Wharfside Wine PLC:

(a) 100% of the ordinary share capital of Marnlev Limited, a company registered in England and Wales, which is no longer trading.(b) 100% of the ordinary share capital of Wizard Wine Limited, a dormant company registered in England and Wales, which owns all of the share capital of

Merlin Wine Limited, a dormant company registered in England and Wales.

11. STOCKSGroup Group Company Company

27.03.06 28.03.05 27.03.06 28.03.05£000 £000 £000 £000

Goods for resale 28,722 27,798 – –

12. DEBTORS Group Group Company Company

27.03.06 28.03.05 27.03.06 28.03.05£000 £000 £000 £000

Trade debtors 3,627 2,852 – –Amounts due from Group undertakings – – 8,896 7,586Other debtors 333 299 – –Deferred tax (see note 5d) – 40 – –Prepayments and accrued income 2,156 735 – –

6,116 3,926 8,896 7,586

The prior year other debtors figure has been reduced by £2,273,000 due to reclassification of amounts due from suppliers to trade creditors. The amounts due fromGroup undertakings have no fixed repayment terms and are interest free.

13. CREDITORSGroup Group Company Company

27.03.06 28.03.05 27.03.06 28.03.05£000 £000 £000 £000

Amounts falling due within one year:Trade creditors 26,361 26,946 – –Corporation tax 770 1,792 – –Other taxes and social security 2,544 2,237 – –Accruals and other creditors 4,710 4,442 – –

34,385 35,417 – –

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 28

NOTES TO THE FINANCIAL STATEMENTS

14. CREDITORSGroup Group Company Company

27.03.06 28.03.05 27.03.06 28.03.05£000 £000 £000 £000

Amounts falling due after more than one year:Amounts due to Group undertakings – – 2,000 2,000

– – 2,000 2,000

The amounts due to Group undertakings have no fixed repayment terms, are interest free and are not expected to be settled within one year.

15. PROVISION FOR LIABILITIES AND CHARGESGROUP

Deferred Deferred NationalBonus Tax Insurance Total£000 £000 £000 £000

At 28 March 2005 164 – 133 297Transferred from debtors – (40) – (40)Provided in the year 15 52 174 241Utilised in year (65) – (38) (103)

At 27 March 2006 114 12 269 395

a) Deferred bonus:There were no deferred bonuses awarded for the financial year as performance criteria were not achieved. The £15,000 provided in the year represents a reduction inthe prior year estimate of the amount expected to be settled in cash. Amounts of deferred bonus and loyalty bonus expected to be settled in newly issued shares arerecognised in shareholders’ funds. All liabilities are expected to be settled within two years. Details of the Deferred Bonus Scheme are set out on page 13.

b) Deferred tax:The movements in the provision for deferred tax are set out in note 5d.

c) National insurance:National insurance contributions which will become payable on exercise of share options have been provided. The share options can be exercised at various datesfrom the balance sheet date to 8 December 2015. The amount payable is dependent on the Company’s share price at the date of exercise of the options. Theprovision has been calculated based on the share price at the balance sheet date of 330.5p and the assumption that 100% of employees will exercise their shareoptions and that the rate of NIC is 12.8%.

16. SHARE CAPITAL2006 2005

Value ValueNumber £000 Number £000

AuthorisedOrdinary Shares of 7.5p each 140,000,000 10,500 140,000,000 10,500IssuedOrdinary Shares of 7.5p each 64,854,869 4,864 63,676,860 4,776

During the year 870,310 Ordinary Shares of 7.5p each were allotted for a consideration of £877,000. The shares were allotted to satisfy the exercise of options. TheCompany issued 220,545 shares to the trustees of the Company’s QUEST, to fulfil obligations under the Company’s SAYE scheme, for a consideration of £600,000funded by the Group. In addition 87,154 shares were issued to the trustees of the Company’s employee share ownership trust to fulfill the requirements of theDeferred Bonus Scheme.

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 29

NOTES TO THE FINANCIAL STATEMENTS

17. EMPLOYEE SHARE OWNERSHIP TRUST

The trust is used to acquire shares in Majestic Wine PLC to satisfy awards under the Deferred Bonus Scheme. The shares are distributed to participants of thescheme at the end of a 2 year deferral period.

At the year end the trust held 161,857 (2005: 201,580) shares with a nominal value of 7.5p each, which are not yet fully vested in the participants. The totalacquisition cost of these shares was £391,000 (2005: £407,000). At the year end the market value of these shares was £535,000 (2005: £527,000).

The shares held by the trust represent the maximum due to be settled after the two year deferral period for the 2004 and 2005 awards under the Deferred Bonus Scheme.The balance of the 2004 award due to be settled in June 2006 is 116,392 shares. The balance of the 2005 award due to be settled in June 2007 is 43,577 shares.

18. QUALIFYING EMPLOYEE SHARE OWNERSHIP TRUST (QUEST)

The trust is used to acquire shares in Majestic Wine PLC to satisfy options maturing under the Company’s SAYE scheme. The shares are distributed to participants ofthe scheme upon maturity of their individual savings plans.

The trust did not hold any shares at the year end. At the previous year end the trust held 15,276 shares with a nominal value of 7.5p each. The total acquisition costof these shares was £17,000 and the market value was £40,000.

19. CO-INVESTMENT PLAN

During the year three executive Directors were granted nil cost options over a total of 145,687 shares under the terms of the Group’s co-investment plan. The profitand loss has been charged with £58,000 representing the cost of the Directors’ best estimate of the extent that the performance criteria will be met, apportioned on a straight-line basis.

20. SHARE OPTIONS

The following options are outstanding for Ordinary Shares.

Date fromOptions at Options at which Expiry Exercise29.03.2005 Granted Exercised Lapsed 27.03.2006 exercisable Date Price

4,840 – – – 4,840 22.12.2001 22.12.2008 £0.769101,720 – 59,200 – 42,520 27.11.2003 26.11.2007 £0.606239,160 – 126,100 – 113,060 27.11.2003 27.11.2010 £0.60649,600 – 45,400 – 4,200 06.07.2004 05.07.2011 £0.76382,120 – 53,960 – 28,160 26.11.2004 26.11.2011 £0.89751,488 – 51,488 – – 01.02.2006 31.07.2006 £0.485

404,700 – 335,200 4,000 65,500 09.07.2005 09.07.2012 £1.145461,300 – 50,050 – 411,250 09.07.2005 08.07.2009 £1.145180,348 – 176,616 3,732 – 26.07.2005 26.01.2006 £0.91511,352 – – – 11,352 26.07.2007 26.01.2008 £0.915

195,700 – 130,100 4,000 61,600 22.11.2005 22.11.2012 £1.2070,300 – 70,300 – – 22.11.2005 21.11.2009 £1.20

322,400 – – 20,000 302,400 08.07.2006 08.07.2013 £1.57829,600 – – – 29,600 08.07.2006 07.07.2010 £1.578

171,420 – 4,396 19,320 147,704 01.09.2006 28.02.2007 £1.26341,104 – – 2,520 38,584 01.09.2008 28.02.2009 £1.263

162,000 – – 28,000 134,000 10.12.2006 10.12.2013 £2.228486,830 – – 46,000 440,830 07.12.2007 07.12.2014 £2.49224,170 – – – 224,170 07.12.2007 06.12.2011 £2.49260,739 – – 47,940 212,799 01.03.2008 31.08.2008 £1.9925,239 – 3,321 1,660 20,258 01.03.2010 31.08.2010 £1.99

– 188,465 – – 188,465 25.07.2008 24.07.2015 £2.635– 239,535 – 20,000 219,535 25.07.2008 25.07.2015 £2.635– 145,687 – – 145,687 25.07.2008 24.07.2015 £nil– 164,480 – 6,000 158,480 09.12.2008 09.12.2015 £2.62– 49,520 – – 49,520 09.12.2008 08.12.2015 £2.62– 130,851 – – 130,851 01.03.2009 31.08.2009 £2.23– 13,423 – 1,155 12,268 01.03.2011 31.08.2011 £2.23

3,576,130 931,961 1,106,131 204,327 3,197,633

The interests of the Directors in the above options are disclosed in the Directors’ Report.

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 30

NOTES TO THE FINANCIAL STATEMENTS

21. RECONCILIATION OF MOVEMENT IN RESERVES AND SHAREHOLDERS’ FUNDSCapital

Share Reserve – own Profit TotalRevaluation Share Premium shares held & Loss Shareholders’

Reserve Capital Account in ESOT Account Funds£000 £000 £000 £000 £000 £000

Group:At 29 March 2004 as previously stated 22 4,701 5,764 (242) 20,584 30,829Prior period effect of adoption of FRS 21 – – – – 1,896 1,896

At 29 March 2004 as restated 22 4,701 5,764 (242) 22,480 32,725Share Issue – 58 458 – – 516ESOT share issue – 17 528 (273) (272) –Options satisfied from QUEST – – – – 9 9Profit for the year – – – – 8,543 8,543Transfer to shareholders funds – deferred bonus

expected to be satisfied in shares – – – – 314 314Equity dividends paid – – – – (2,846) (2,846)Shares vesting under deferred bonus scheme – – – 108 (108) –Currency translation differences on

foreign currency net investments – – – – 71 71

At 28 March 2005 22 4,776 6,750 (407) 28,191 39,332Share issue – 64 813 – – 877ESOT share issue – 7 225 (116) (116) –QUEST share issue – 17 583 – (600) –Options satisfied from QUEST – – – – 199 199Profit for the year – – – – 10,481 10,481Transfer from shareholders funds – reduction in deferred

bonus expected to be satisfied in shares – – – – (15) (15)Transfer to shareholders funds – co-investment plan

expected to be satisfied in shares – – – – 51 51Equity dividends paid – – – – (3,785) (3,785)Shares vesting under deferred bonus scheme – – – 132 (132) –Currency translation differences

on foreign currency net investments – – – – 19 19

At 27 March 2006 22 4,864 8,371 (391) 34,293 47,159

Company:At 29 March 2004 as previously reported – 4,701 5,764 – 6,006 16,471Prior period effect of adoption of FRS 21 – – – – (104) (104)

At 29 March 2004 as restated – 4,701 5,764 – 5,902 16,367Share issue – 58 458 – – 516ESOT share issue – 17 528 – – 545Options satisfied from QUEST – – – – 9 9Profit for the year – – – – 3,016 3,016Equity dividends paid – – – – (2,846) (2,846)

At 28 March 2005 – 4,776 6,750 – 6,081 17,607Share issue – 64 813 – – 877ESOT share issue – 7 225 – – 232QUEST share issue – 17 583 – (600) –Options satisfied from QUEST – – – – 199 199Profit for the year – – – – 3,787 3,787Equity dividends paid – – – – (3,785) (3,785)

At 27 March 2006 – 4,864 8,371 – 5,682 18,917

A separate profit and loss account dealing with the results of the Company only, has not been presented as permitted under Section 230 of the Companies Act. The profit for the Company after taxation was £3,787,000 (2005: £3,016,000).

The cumulative amount of goodwill arising on the acquisition of subsidiaries prior to 31 December 1997 written off immediately against reserves at 27 March 2006 is£1,595,000 (2005: £1,595,000).

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 31

22. COMMITMENTS

a) Operating leasesAt 27 March 2006 the Group had annual commitments under non-cancellable operating leases as follows:

Land and Buildings Other

27.03.06 28.03.05 27.03.06 28.03.05£000 £000 £000 £000

Operating leases which expire:Within one year 72 57 115 61Between two and five years 876 572 344 406In over five years 3,966 4,125 – –

4,914 4,754 459 467

The majority of the Group’s leases of land and buildings are subject to rent reviews of between three and five years.

b) Capital expenditure commitmentsCapital expenditure authorised and contracted for but not provided in the accounts amounts to £736,000 for the Group (2005: £267,000).

23. FINANCIAL INSTRUMENTS

FundsThe disclosures below, excluding foreign currency disclosures, exclude short term debtors and creditors.

The Group’s only financial asset was cash at bank and in hand of £5,916,000 (2005: £7,840,000). Funds not required immediately for the Group’s operations areinvested in sterling denominated deposit accounts. The funds are placed on a combination of overnight and monthly deposits. The rates are reviewed regularly andthe best rate obtained in the context of the Group’s needs. The weighted average floating interest rate earned in the year on the Group’s sterling deposits was 4.39%(2005: 3.32%). The only interest risk is related to the floating rates on the cash balances and is insignificant.

CurrencyThe cash profile at 27 March 2006 was:

Cash at floating rates

27.03.06 28.03.05£000 £000

Sterling 5,119 7,028Euros 391 583Australian Dollars 406 229

5,916 7,840

There were no financial liabilities as at 27 March 2006 or 28 March 2005 requiring disclosure. There is no material difference between the book value and fair value of any financial asset or liability.

Foreign currencyThe Group covers the exposure to foreign purchases by acquiring forward currency contracts. Contracts are put in place prior to the setting of retail prices. Theexposure may be covered up to a period of one year. There was no material exposure, in respect of monetary assets and liabilities, after taking into account foreigncurrency contracts. The value hedged at any point is always in excess of the outstanding liability. The majority of these contracts are in Euros maturing in less thanone year. There is a £81,000 difference between book value and fair value on these forward exchange contracts. Last year the difference was £30,000.

The nominal value of forward currency contracts is shown below.27.03.06 28.03.05

£000 £000

Forward foreign currency purchases 12,454 16,975

Borrowing facilitiesThe Group has an overdraft facility with Barclays Bank PLC that is utilised to cover seasonal borrowing requirements. The facility is negotiated annually and wascurrent at 27 March 2006. The undrawn committed overdraft facility available at 27 March 2006 was £6,000,000 (2005: £4,000,000) and expires in July 2006.

MAJESTIC WINE PLC ANNUAL REPORT AND ACCOUNTS 2006 32

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